Please tell us where you entered the "interest from government obligations ". Was it on the 1099-INT screen in Box 3?
I entered an amount on a test return in Box 3, and it appeared on the CA 540 (Resident) in Part 1, line 2, which then carried to the 540 line 14 to be subtracted from CA state income.
Is it perhaps that you are not filing as a resident of CA?
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